Value of snow is in the trillions of dollars
Babson professor Michael Goldstein co-authored a paper for the American Geophysical Union, with collaborators the University of Alaska Fairbanks Geophysical Institute’s Matthew Sturm, and Charles Parr (Geophysical Institute) assessing the monetary value of seasonal snow, noting that the costs associated with the ongoing changes in snowfall are, “measured in trillions, not billions, of dollars.”
This work on valuing snow comes on the heels of a 30-year run of falling snow levels and changing snow conditions. Snow scientists have recorded a global decrease in snow depth and extent, that snow is falling later and melting earlier, and that more winter precipitation is coming as rain rather than snow. The potential impacts of these trends mean that action needs to be taken soon.
“With snow cover changing worldwide in several ways, there is pressing need to determine global, regional, and local rates of snow cover change, and to link these to financial analyses that allow for rational decision-making,” the researchers write.
The trend of decreasing snow creates problems in several ways. For one, less snow means that there will be less mountain run-off, which provides water to low-lying adjacent areas in the spring and summer, when farmers need it most. This spring run-off is extremely important for agriculture. Portions of the multi-billion-dollar outdoor recreation industry are based on snow cover. Cities like Los Angeles depend on snow runoff for the water in their faucets, for power, and for much of California’s food production.
Estimated losses to agriculture and industry in the American Southwest from reduced snowmelt flowing into the Colorado River alone range from $1 billion to over $1 trillion. Most usable water in the western United States comes in the winter in the form of snow, and the snowpack stores water until spring and summer when it is most needed. Approximately 162 million acre feet of snow water equivalent are deposited in the western mountains each winter.
Further, snow is uniquely helpful for keeping the planet cool.
“The cooling power of long-lying spring snow in northern Canada, Alaska, and Siberia (an area of 19 million km2) sheds about 2X 10-12 gigajoules of energy per year back to space that might otherwise have heated our planet,” the researchers write. “This cooling benefit doubles when we add in the effect of snow-covered Arctic sea ice.”
The researchers asked what is the financial loss as the snow resource changes? They merged snow science and financial analysis to find the answers. Depending on the valuation of water and the speed of change, the results showed losses of $1 trillion to as much as $4.4 trillion in 20 years from now.
One critical piece of information is knowing the rate of change to snow, both now and in the future. Small differences in the speed of the change can make a huge difference in whether projects to mitigate the loss, for example, building more dams and reservoirs. “Given the magnitude of the impact and possible mitigation costs, we need to be making these decisions on the soundest and best scientific facts and knowledge possible,” the researchers write.
As decreasing snow is linked to our increasingly warming climate, snow loss can become a self-perpetuating problem. The solution, Sturm and his collaborators say, is action both within the scientific community and by decision makers and stakeholders.
Michael Goldstein is the Faculty Director of the Master of Science Program at Babson College. He holds the Donald P. Babson Chair in Applied Investments and is a Professor of Finance at Babson College. He has taught in the undergraduate, MBA, and Executive Education programs. He has also taught at Boston College and at the University of Colorado at Boulder, where he received the Proctor & Gamble Teaching Excellence Award. He was an Honorary Professor at Queen’s University – Belfast (UK), a Visiting Professor at Trinity College – Dublin (Ireland) and at The University of Sydney (Australia).
Goldstein’s research specialty is examining the structure of markets. He also works in climate change, and has received a National Science Foundation (NSF) grant to study climate change and the Arctic economy. He also does work on dividends, real estate, asset pricing, and privatization and has presented at numerous conferences worldwide. He is currently an Associate Editor for Financial Management, The Financial Review, and Finance Research Letters. His papers have been published in major finance academic journals, including The Journal of Finance, The Journal of Financial Economics, The Review of Financial Studies, The Journal of Financial and Quantitative Analysis, and The Journal of Financial Markets. Dr. Goldstein has been interviewed by many national and international media groups, including print, television and radio.